Australian shares closed higher on Tuesday, supported by mining and energy stocks, even as investors remained cautious ahead of local inflation data and a likely sharp US interest rate hike. The S&P/ASX 200 index was up 0.3% at 6,807.30.

“The market is just treading water right now,” said Brad Smoling, managing director at Smoling Stockbroking.

Investor focus is on the US Federal Reserve meeting and Australia’s inflation data due on Wednesday.

Futures trade points to a 75 basis point (bp) Fed hike, with about 10% risk of a 100 bp hike, while traders expect a 50 bp hike in Australia next week with about a 20% chance of a 75 bp hike.

Smoling said it will be interesting to see the impact of a higher-than-expected rate hike on Australian banks.

“More rate hikes passed on by Australian banks will have a very big impact across the property sector, the retail sector and anything associated with that.”

Domestic miners rose 1.8% on the back of higher iron ore prices.

Sector majors BHP Group and Rio Tinto advanced 2.5% and 1.9%, respectively. Crude prices rose for a second day and lifted Australian energy stocks by 2.8% amid increasing concerns over tightening European supply after Russia cut gas supply through a major pipeline.

Woodside Energy Group rose 2.8% and Whitehaven Coal firmed 6.4%.

Gold stocks fell 1.9%, as bullion prices flitted in tight range after investors refrained from taking big bets on the yellow metal ahead of Fed’s rate decision. Shares of heavyweight Newcrest Mining dropped 3.1%.

Australian shares end subdued ahead of inflation data, Fed decision

Healthcare stocks slumped nearly 1% to extend losses to a third session.

New Zealand’s benchmark S&P/NZX 50 index dropped 0.3% to end the session at 11,166.56.